The UK's housing market is bracing for a perfect storm of reforms as Prime Minister Andy Burnham outlines plans to overhaul capital gains tax, replace stamp duty with a land value tax, and boost social housebuilding – moves that have left property experts grasping for clarity amidst the uncertainty. The prime central London (PCL) market is already feeling the strain, with prices plummeting by 3.6% in June, marking the second consecutive month of decline, according to analysis from Knight Frank.
Prime outer London, however, has demonstrated greater resilience, with average prices falling by just 0.4% in the year to June – a welcome return to levels seen in June 2022. Transaction volumes in this segment have declined by 7%, but offers made are up 5%, hinting at stronger demand compared to prime central London.
Broadly speaking, the UK housing sector is under pressure: mortgage approvals fell 14.8% last week to 56,205 – the tenth largest monthly decline since records began in 1993 – while HMRC data revealed a 2% drop in transaction numbers between April and May, missing the seasonal spring increase. Knight Frank's Tom Bill attributes these declines primarily to the Middle East conflict's impact on mortgage rates.
The Prime Minister's proposals have sparked warnings from various quarters: Foreign Investors for Britain expressed concern that perceived anti-business sentiment could deter high-net-worth individuals from contributing to UK economic growth, while former Treasury advisor James Nation questioned the feasibility of devolved tax-raising powers for local authorities in the current fiscal climate.